Mutual Fund Talk

Featured Fund: Vanguard Wellington (VWELX)

Kiplinger's Personal Finance reviews the legendary balance fund Vanguard Wellington.

One way Bousa picks stocks is by studying and projecting the supply and demand picture for industries and sectors. The idea is that when an industry is experiencing a supply shortage, companies that produce that particular product can raise prices. That often results in happy earning surprises -- and rising share prices. For example, Bousa loaded up on oil and gas stocks, including ExxonMobil and ConocoPhillips, when he saw that surging energy demand from China and India would strain supply. After observing the massive spending on telecom and technology in the late 1990s, Bousa decided to largely avoid those sectors. These days, Bousa thinks the supply-demand picture for food is attractive, so he's investing in such companies as John Deere, the big agriculture equipment maker, and Syngenta, a Swiss seed-technology outfit. (Bousa thinks globally and keeps 15% to 17% of the fund's stock allocation in foreign companies.)

This fund has a value bent to it -- the dividend yield in the stock portion of the portfolio is 2.2%, 20% above the market's average yield. But like some other bargain hunters, Bousa has been detecting value of late in traditional growth stocks. "Whenever we can get growth stocks at value prices, it lowers our risk," he says. This line of thinking led him to invest in Medtronic in the beaten-down medical equipment sector. He also looks for companies that are innovators and leaders in their businesses (for example, DuPont), or "broken growth" companies, such as General Electric. When he pulls the trigger, he holds companies for four years on average.